San Diego Home Builders San Diego, CA

Unlicensed contractors feel the sting of the law

by Staci Giordullo

The undercover officers were ready. Staged in a San Diego area home, members of the Contractors State License Board Statewide Investigative Fraud Team in April invited dozens of suspected unlicensed contractors to bid on a home improvement project. One by one, they came into the home, put in an offer for the work and, when they failed to produce a valid contractor's license, were arrested on the spot — 35 offenders in total.

Each state and local licensing board across the country has its own procedures for catching unlicensed contractors. Some rely on consumer tips or work with building officials to ensure legality when a permit is pulled. Others perform random checks at work sites. However, all are limited by budget and staffing constraints, leaving the actual law enforcement running the gamut from barely there to nearly everywhere.

California operates one of the most ambitious efforts, conducting covert sting operations every week. The CSLB estimates the work done by unlicensed contractors supports an underground economy worth $60 billion to $140 billion a year — most of which is not taxed or insured. "Our tolerance is very low," says CSLB spokesman Rick Lopes. "They're breaking the law."

Similar enforcement efforts in Florida took center stage recently after Department of Business and Professional Regulation Secretary Charles Drago learned unlicensed contractors were a top concern of state residents. "I've heard from consumers and licensees who have been harmed financially," Drago says. "Their stories have motivated us to increase our efforts."

During a sting in California, law enforcement runs a background check on each contractor to search for outstanding warrants, and everyone is given a licensing application packet. "We're not trying to put them out of business," Lopes says. "We're trying to get them to follow the law." While most violators are issued a citation and fined, unlicensed contractors busted more than once spend a mandatory 90 days in jail.

New York doesn't license home-improvement contractors at the state level, but Westchester County last year passed a law giving police the authority to impound contractors' vehicles and equipment, resulting in less unlicensed activity. "We mean business when it comes to cracking down on unlicensed contractors," says County Executive Andy Spano.

In New York City, the number of complaints have dipped while the number of licensed contractors continues to rise thanks to aggressive enforcement, including raids and confiscation, according to Beth Miller, spokeswoman for the Department of Consumer Affairs.

Hiring an unlicensed person can have dire consequences. "These unlicensed individuals don't pay taxes, have insurance on their workers or bonds," Lopes says. "It's not unusual for them to be involved in other illegal activities as well. They also make it very difficult for licensed contractors to compete."

"Unlicensed contractors put [homeowners] at personal and financial risks," agrees Jay Carlson, president of the Florida Home Builders Association. "Consumers often become victims, and the livelihood of law-abiding, licensed contractors is threatened.